- 1Q24 revenue/adj. PATMI was in line with expectations at 24%/27% of our FY24e forecasts. 1Q24 revenue grew by 19% YoY, which was supported by strength in its Cash App segment. Adj. PATMI doubled YoY to US$543mn due to higher operating leverage.
- For FY24e, Block expects consolidated gross profit growth of 17% YoY to US$8.8bn (prev. US$8.7bn) driven by its Cash App segment led by a surge in active users and higher engagement. The company also raised its outlook for adj. EBITDA to US$2.8bn from US$2.6bn on cost-cutting measures.
- We upgrade to BUY from ACCUMULATE recommendation as we account for recent share price performance. We nudge our DCF target price higher to US$96.00 (prev. US$94.00) with an unchanged WACC of 7.1% and a terminal growth rate of 4%. Our FY24e revenue estimates remain unchanged while we increase our adj. PATMI by 3% to account for lower expenses. Catalysts for Block include continued margin expansion and Cash App’s ability to serve as a traditional bank account substitute for millions of lower-income and underbanked consumers.
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